To access this article visit: “Microfinance and Socially Responsible Investment in Latin America”
Authors: J. Cheng and M. De Sousa-Shields
Published by: Enterprising Solutions Global Consulting and the Inter-American Development Bank, September 2003
Quantitative Information: The statistics on Latin American microfinance are drawn from other sources. The article has information on “socially responsible” investment (SRI). Three to five billion dollars are invested in (SRI) projects each year, but only $250 million of that goes to microfinance. The bulk of the article deals with the qualitative reasons for this relatively low number.
Qualitative Information: The article argues that main reason for low investment in microfinance is that investors do not understand the industry, and therefore do not have the expertise to decide where to invest in microfinance. One solution is to invest in intermediary funds, which have the expertise to evaluate MFIs and make good investments. Rather than educate investors about MFIs, the article argues that MFIs should adapt to investors. MFIs lack of credibility with investors because many are from non-profit backgrounds. The article recommends that MFIs use financial tools that investors understand, such as portfolio securitization and bond offerings. Lastly, MFIs need better measurements of their social impact for investors.
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